VIP-MD is a health maintenance organization (HMO) located in North Carolina. Unlike the traditional fee-for-service model that determines the payment according to the actual services used or costs incurred, VIP-MD receives a fixed, prepaid amount from subscribers. The per member, per month rate (PMPM) is determined by estimating the health care cost per enrollee within a geographic location. The average health care coverage in North Carolina costs $374 per month, which is the same amount irrespective of the subscribers age. Because individuals are demanding quality care at reasonable rates, VIP-MD must contain its costs to remain competitive. A major competitor, National Physicians, entered the North Carolina market early in the current year with a monthly premium of $331. VIP-MD wants to maintain its current market penetration and hopes to increase its enrollees in the current year. The latest data on the number of enrollees and the associated costs follow:

Age	Enrollment in Current Year				Projected Enrollment Next Year				Average Monthly Cost in Current Year
14		46,288				49,577			$	11,148,472
514		83,056				85,263				10,060,232
1519		96,473				96,487				8,437,424
2024		66,846				68,482				9,540,024
2534		134,096				133,154				26,432,808
3544		167,476				176,046				38,882,708
4554		86,096				91,489				22,742,536
5564		99,624				102,523				28,692,312
6574		156,888				162,159				49,518,744
7584		68,495				73,065				33,433,360
85 years and older		24,099				27,449				24,287,075
		1,029,437				1,065,694			$	263,175,695

Required:

1. Calculate the target cost required for VIP-MD to maintain its current market share and profit per enrollee in the current year.

2. Costs in the health care industry applicable to VIP-MD and National Physicians are expected to increase by 7% in the coming year. VIP-MD is planning for the year ahead and is expecting all providers, including VIP-MD and National Physicians, to increase their rates by $25 to $356. Calculate the new target cost assuming again that VIP-MD wants to maintain the same profit per enrollee as in the current year.